When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (VXX) – BUY
BUY the IPath S&P 500 VIX Short Term Futures ETN (VXX)January 2019 $20 puts at $0.40 or best
Opening Trade
10-8-2017
expiration date: January 18, 2019
Portfolio weighting: 5%
Number of Contracts = 125 contracts
This has not been a volatile year. The number of days the Volatility Index (VIX) spent trading over $20 can almost be counted on two hands. The Mad Hedge Market Timing Index at 24 is also a great time to lay on a short volatility trade.
I am therefor buying the IPath S&P 500 VIX Short Term Futures ETN (VXX)January 2019 $20 puts at $0.40 or best.
If I am right, this is a well-defined limited risk long dated position with tremendous upside leverage.
This is a bet that something good happens sometime in the next three months and the IPath S&P 500 VIX Short Term Futures ETN (VXX) plunges like a lead balloon. This position will also be a great hedge for you position in Microsoft (MSFT).
It is also a bet that this will happen soon, before time decay eats up the value of our position.
This is a high-risk unhedged trade, so I am going in with only a 5% position.
Don’t pay more than 60 cents or you’ll be chasing.
The attractiveness of such a position is apparent in the math.
The (VXX) only needs to fall $4 to $26 to where it was last Wednesday for the value of this position to rise 350%, or from $0.40 to $1.80, as long as this happens in the next month or so.
Here are the specific trades you need to execute this position:
Buy 125 January 18 2019 (VXX) $20.00 puts at………….…$0.40
Net Cost:…………($0.40 X 100 shares per option X 125) = $5,000
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile close to expiration.
If you don’t get it done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.